Focus on the continuous improvement of the core competitiveness of communications manufacturing, the emergence of scale advantages bring solid performance cornerstone.
The company focuses on the manufacture of communication network equipment and maintains a relatively good growth trend all the way, with a compound growth rate of more than 25% in the past three years. There are three major production bases in Taicang in the Yangtze River Delta, Shenzhen and Vietnam in the Pearl River Delta, and seven R & D centers in Shanghai, Shenzhen and Beijing. The company has a foothold in East Asia and aims at the world, it has opened up all the contract manufacturing modes of network communication products, including ODM, OEM, JDM, EMS, and successfully entered the leading position of Netcom in the industry segment, with a leading market share.
At this stage, the company's traditional business mainly includes Netcom (74.7% of revenue) and Datong business (17.5% of revenue). The new business includes sensor closed testing and automotive electronics business, with 2021 revenue exceeding 10 billion yuan, of which revenue at home and abroad basically accounts for half. With the acceleration of gigabit network construction, the company's main network communication business (including PON, AP and other products) has maintained a trend of rapid growth in recent years. In terms of digital communication business, the digital economy has driven the development of the data center industry chain and led to the continuous increase of market demand for digital communication products, including switches, and the company's scale advantage is expected to further increase the market share of downstream customers. Generally speaking, the cornerstone of the company's traditional business is solid, laying a solid foundation for vigorously developing innovative business and forging ahead.
Benefit from the continuous improvement of the prosperity of the industry, the company's advantage of reuse automotive electronics business is expected to exceed expectations.
Combined with traditional business advantages, the company's automotive electronics-related supply chain and manufacturing capacity advantages can be quickly replicated, benefiting from the rising market penetration of new energy vehicles to bring a large market space, the company's automotive electronics business expansion is expected to exceed expectations. The advantages are mainly shown in that on the one hand, the company can expand the chip to gain advantages in the direction of the supply chain; on the other hand, it has advantages in capacity manufacturing. The company's automobile manufacturing is located in Taicang, and Taicang is the director of the triangle car baseline area. At the same time, part of the company's production capacity has been moved to Vietnam, and the vacated plant only needs to be equipped with equipment to have rapid production capacity.
At present, the company's automotive electronic business is mainly in the field of intelligent cockpit and ADAS (Advanced driving Assistance system): the first step starts from the manufacture of PCBA, and cuts into the market with OEM mode and EMS mode; the second step will gradually begin to develop through some cooperation, including resource integration with the whole vehicle factory and Tier1, as well as the introduction of ODM, start the research and development of the company's own products, and gradually expand the automotive electronics business. In the long run, we expect that in about 3-5 years, the proportion of the company's automotive electronics business revenue is expected to quickly rise to a higher level, and is expected to reach about 30%; generally speaking, while the company stabilizes the basic market, continue to expand automotive electronics and other new business, enrich product lines, and high performance growth in the future.
The company's sound assets are excellent, and the performance inflection point can be expected to open a high growth curve.
The company's 2022Q2 achieved revenue of 2.74 billion, an increase of 9.98% over the same period last year, and realized deduction of non-return net profit of 139 million, an increase of 97.11% over the same period last year, showing a performance inflection point (2022H1 realized net profit of 176 million, an increase of 36.65% over the same period last year). The average price of 2022H1's main business products increased by 14.84% over the same period last year, the overall rate was 7.62%, down 0.59%, and the gross profit margin was 12.3%, up 0.5% from the same period last year. Considering the sound foundation of the company's traditional business and rapid breakthrough in innovation business, we give the company 22E-24E annual return net profit forecast value of 419 million yuan, 502 million yuan and 613 million yuan, corresponding to EPS of 0.53,0.63 yuan and 0.77 yuan, corresponding to PE of 16.05,13.40,10.99 times. In view of the company's high growth and low valuation advantages, we give the company a "recommended" rating.
Risk tips: the impact of the global epidemic and foreign policy uncertainty; exchange rate fluctuations; raw material price volatility risk; innovation business transformation risk.
Catalyst: automotive electronics business order breakthrough, customer expansion, certification and so on.